Buy Property and Reside in Malta

Buying Property

A higher standard of living, better weather and a more relaxed way of life are just some of the reasons why millions of Britons are retiring abroad. The UK Office of National Statistics reported that around 400,000 citizens left the UK last year more than 1,000 a day to destinations like Spain, Portugal, Cyprus, and Malta.

Still, to many potential expatriates, Malta is not rated high in the pecking order though the advantages are very good for both retirees and business owners. If you are considering relocating to Malta simply to live or to transfer your business activities here, the following could help make your decision much easier.

Maltese Tax Status

Expatriates in Malta can either pay tax on their income remitted to Malta at the normal rates of tax up to 35 per cent or opt for the Residents Scheme where a fiat rate of 15 per cent is charged only on income received in, or remitted to Malta from local or foreign sources. This is subject to a minimum payment of Eur4,150. This option can be very favourable if you intend remitting more than Eur28,OOO per annum and/or if you are moving from a higher tax jurisdiction such as the UK. The highest tax band in the UK is 40 per cent on income over Eur46,000 while in Sweden, income tax rates are in the region of 60 per cent. The potential for paying 15 per cent makes Malta extremely attractive. Malta's tax legislation also provides for relief from double taxation through negotiated double tax agreements or through unilateral provisions.

Residency

Under the Residents Scheme Regulations (2004) you can become a resident by obtaining a certificate from the Inland Revenue, issued for an indefinite period as long as certain conditions are satisfied annually. The latter include purchasing or renting a property over a certain value and having minimum capital and disposable income. Holders of a residency certificate may reside indefinitely in Malta and can enter and leave freely without having to go through other formalities. Residents can apply for an 10 card and as long as they pay National Insurance contributions or receive a European State Pension, they are entitled to receive the benefits of the Maltese State Health Care system.

Malta and Gozo offer plenty of good quality properties to entice you. More than just a home, the main attraction of buying property is its generation of healthy and steady investment returns -space is limited and locals look at property as an investment asset. What are the financial costs and implications?

  1. Initial costs: Stamp duty of 5 per cent and notary fees and expenses of 1 per cent can be expected. There is a reduction when the property is bought as a principal residence. Estate Agency costs are borne by the seller.
  2. Real Estate Tax: Unlike other European countries, Malta does not levy property or council tax. Thus, no tax is charged whether a property is inhabited or not.
  3. Capital Gains Tax: So long as the property has been occupied as your main residence for a period of three consecutive years or more and not vacated for more than one year, there is no capital gains tax liability on the sale.

Setting up your business

Many international firms in the financial, e-gaming, pharmaceutical and other industries operate in Malta and enjoy favourable tax treatment compared to other Europ~an jurisdictions. Profits from Maltese registered companies are currently taxed at 35 per cent. There is, however, an available refund payable to qualifying shareholders which amounts to six- sevenths of the Maltese tax paid on the profits out of which the dividend distribution was effected. The effective rate of tax is, therefore, reduced from 35 per cent down to 5 per cent. Changes came into force in January 2007 to allow the refundable tax credit system to be extended to dividend distributions by all companies resident in Malta. The practicality of this is that non-resident shareholders may continue to receive the tax credit and the effective rate of tax of only 5 per cent.

Malta has many financial advantages to offer foreign citizens and businesses. There is a growing trend of younger retirees relocating to Malta who purchase property which puts money into the economy. This, together with the number of foreign-owned companies being registered here, means undoubted gains for the financial services sector which, in turn can only be positive for the economy in general.